The remodeling industry is still recovering from the housing downturn, economic recession and significant home equity loss, according to the Remodeling Industry Update released by Harvard University’s Joint Center for Housing Studies (JCHS).

Recovery will be gradual. The center’s most recent Leading Indicator of Remodeling Activity (LIRA) report points to the market nearing a cyclical low by early 2010 to be followed by a recovery in the first half. A quarterly LIRA update is due later this month.

Planned spending is recovering faster for upper-income homeowners, for less-leveraged seniors and for smaller cash projects.

Other findings were that stimulus program/green initiatives have had only modest impact on home improvement spending. For example, less than half of contractors, reporting on the basis of 2008 revenue, say they have worked on projects funded under the stimulus program. Of those who worked on such projects, building envelope energy tax credit projects dominated their stimulus-funded activities.

Existing-Home Sales

Activity Slows Following Gains

Existing-home sales in August gave back some of their strong gain in July but remain above year-ago levels, according to the National Association of Realtors.

Existing-home sales — including single-family, townhomes, condominiums and co-ops — declined 2.7 percent to a seasonally adjusted annual rate of 5.10 million units in August from a pace of 5.24 million in July, but remain 3.4 percent above the 4.93 million-unit level in August 2008. In the previous four months, sales had risen a total of 15.2 percent.

Lawrence Yun, NAR chief economist, said the tax credit is working. “The first-time buyer tax credit is having the intended impact of bringing buyers into the market, allowing them to take advantage of very favorable affordability conditions,” he said.

House Price Index

Small Increase Recorded

U.S. home prices rose 0.3 percent on a seasonally adjusted basis from June to July, according to the Federal Housing Finance Agency’s monthly House Price Index. The previously reported 0.5 percent increase in June was revised downward to a 0.1 percent increase. For the 12 months ending in July, U.S. prices fell 4.2 percent. The U.S. index is 10.5 percent below its April 2007 peak.

The FHFA monthly index is calculated using purchase prices of houses backing mortgages that have been sold to or guaranteed by Fannie Mae or Freddie Mac. For the nine Census Divisions, seasonally adjusted monthly price changes from June to July ranged from -0.9 percent in the East South Central Division to + 1.6 percent in the Pacific Division.